Prediction of the
Financial Forum and Real Economy
On the scale of rigor, the low end of the range includes a hunch by an investor that a newborn technology will create a vibrant market and render obsolete a mature industry. Meanwhile the opposite end of the spectrum is showcased by a software agent that predicts the price of a stock and learns from its mistakes in order to improve its performance over time.
An investor who wants to divine a market of any sort faces a daunting task. The stumbling blocks include the whims of human actors and the flukes of natural forces. A case in point is a ramp-up of the stock market to ditsy heights by a horde of berserk traders. Another sample involves the smackdown of a regional economy by a monstrous earthquake that knocks out a swath of manufacturing plants and power grids.
In a world racked by chance and chaos, the hapless investor is hard-pressed to peer into the future with any measure of confidence. Even so, the lack of clarity does not mean that anything goes. On the contrary, anyone with a smidgen of sense knows that some things are more likely to crop up than others.
In that case, a glimpse of the future is a matter of degree rather than category. For this reason, the meaningful question is not whether prediction is feasible, but to what extent the task can be achieved.
In a way, the forecaster encounters the same type of challenge in selecting a technique for prediction. More precisely, the apt approach happens to be relative rather than absolute. The best choice of method depends on a bunch of factors including the skills of the user and the thrust of the application.
To begin with, each approach has its strengths and drawbacks. Moreover a given method may work like a charm in the hands of one user but not another. For these and other reasons, the shrewd player weighs a variety of techniques before deciding on the right tool for the job in forecasting a market of any sort.
Read more on Market Forecasting.